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Trader Talk with Bob Pisani

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  Thursday, 25 Sep 2014 | 1:37 PM ET

Hawks and Bears: Why the market is being mauled

Posted By: Bob Pisani
Trader on the floor of the New York Stock Exchange.
Getty Images
Trader on the floor of the New York Stock Exchange.

A number of factors appear to be moving markets around on Thursday. In addition to the usual rumors of a "large seller" hitting the sell button, there are at least two developments that are getting a lot of attention:

1) Richard Fisher, the head of the Dallas Federal Reserve, said early Thursday that the Fed may start raising rates in the spring of 2015—earlier than most expected. Of course he is a hawk, but the comments were widely passed around, and he seems to be getting a bit louder as he gets closer to stepping down next April.

In particular, Fisher said "We're beginning to see extreme risk taking in the junk bond markets." Not surprisingly, high yield exchange-traded funds (ETFs) like the iShares High Yield ETF and the SPDR High Yield ETF are down about a half-percent (very large decline for a bond fund) on heavy volume.


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  Wednesday, 24 Sep 2014 | 1:26 PM ET

IPOs survive first test after Alibaba—but barely

Posted By: Bob Pisani
A jacket worn by a trader at the NYSE during the Alibaba Group IPO opening.
Adam Jeffery | CNBC
A jacket worn by a trader at the NYSE during the Alibaba Group IPO opening.

I said last week that the real test for the initial public offering (IPO) market would be the ability to absorb the more than $7 billion in IPOs and secondaries coming this week in the wake of Alibaba.

Well, the early results are in, and they are decidedly mixed. Two of the four IPOs priced this week have done so below the expected range. Consider the following:


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  Tuesday, 23 Sep 2014 | 10:14 AM ET

Chinese data beat—too bad it's no help to markets

Posted By: Bob Pisani

Chinese manufacturing data was better than expected, but that's not helping equities. At least for the moment, traders are more preoccupied with new U.S.-led military action in the Middle East.

The Shanghai Composite was up 0.9 percent, but most of the rest of Asia was down as after China's Flash Manufacturing Purchasing Manager's Index (PMI) came in stronger than expected , at 50.5 vs 50.0. New orders also rose to 52.3, up from 51.3.

That helped the Australian stock market rise 0.9 percent. Base metals, however, are mixed: copper and aluminum are down, while nickel is rising. Europe, however, is weak across the board, and that fed into early weakness on Wall Street. PMIs there showed clear signs of a slowdown.

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  Monday, 22 Sep 2014 | 1:15 PM ET

Here's why it's not time to panic...yet

Posted By: Bob Pisani
A trader works on the floor of the New York Stock Exchange on September 15, 2014 in New York City.
Getty Images
A trader works on the floor of the New York Stock Exchange on September 15, 2014 in New York City.

It's a lousy day for global growth fans.

It's one of those days where the market is worse than the indices indicate…5 to 1 declining to advancing stocks at the NYSE, with notable weakness in Energy, Consumer Discretionary, and particularly commodity names.

It's the commodity complex that is the root of the problem. Gasoline down 2.2 percent, WTI Crude Oil down 1.2 percent, Nickel down 4.2 percent and Copper down 1.7 percent.

When you have a day like this, you get shippers down big: Frontline (FRO), for example, down 7.9 percent, Eagle Bulk Shipping (EGLE) down 9.3 percent.

You also get iron ore and steel stocks weak...big names like BHP (BHP) are down three percent or more.

Global growth slowdown concerns are also weighing on emerging markets...

In a broader context, we are also seeing weakness in momentum names like Chinese internets and social media stocks.

So what's causing this jitteriness? Not much at all. Chinese Finance Minister Lou Jiwei, speaking last night at the G20 meeting, implied that a major stimulus program might not be forthcoming. There's some concern that the manufacturing PMI to be released tonight might be weak.

But that is pretty thin gruel for a market selloff.

My sense is a lot of this will change once Q3 earnings start to come in. Overall, Q3 earnings look pretty good. The Street estimates are around 6 percent growth, that is what we had last quarter and we ended up with almost 10 percent growth in earnings, another record.

In my mind, it is still basically a Goldilocks scenario. I see nothing on the tape that suggests this is the beginning of a major selloff. We are continuing to grind around 2,000 on the S&P 500.

Inflation? Not here, not yet. Big-time economic growth? No. Fed worries? The Fed is usually a bigger threat to stocks when inflation is around than when they are responding to slightly stronger growth.

If the usual pattern holds, a few more days like this and buyers will likely come out of the woodwork.

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  Monday, 22 Sep 2014 | 10:23 AM ET

New IPOs test whether there's life after Alibaba

Posted By: Bob Pisani
Trader on the floor of the New York Stock Exchange during Alibaba IPO, September 19, 2014.
Adam Jeffery | CNBC
Trader on the floor of the New York Stock Exchange during Alibaba IPO, September 19, 2014.

Now that Alibaba's record-breaking offering is out of the way, global markets are gearing up for a raft of new recruits. Another wave of initial public offerings (IPOs) is building this week.

Reuters notes a wave of 12 new flotations expected in China this week. In London, several big names may go public shortly, including shoemaker Jimmy Choo, and home builder Miller.

The test for the broad IPO group will be Rhode Island based regional bank Citizens Financial, a spin off of Royal Bank of Scotland, which will likely be the second-largest IPO of the year after Alibaba.

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  Friday, 19 Sep 2014 | 4:34 PM ET

Alibaba IPO: A study in price transparency

Posted By: Bob Pisani
Alibaba signage at the New York Stock Exchange at their IPO, September 19, 2014.
Adam Jeffery | CNBC
Alibaba signage at the New York Stock Exchange at their IPO, September 19, 2014.

Alibaba (BABA) priced at $68, opened at $92.70, closed at $93.89. But the most interesting part of the process is the price discovery mechanism. How do you decide what price you should open at?

In the case of Alibaba, there was enormous demand right at the outset. In fact, there were essentially NO sellers at the initial price of $68.

The initial price indication was given a little after 9:50 a.m. ET: Roughly 25 million shares paired off (equal number of buyers and sellers) at $80-$83. Even at that price, there were bids for millions of shares more where there were no corresponding sellers.

How an IPO gets priced, step by step

What to do? Increase the price. The next two indications were stepped up in $3 intervals: $82-$85 and $84-$87. Then about 10:43 a.m., the indication began to tighten to a $2 band: $86-$88, and then the indications starting coming more frequently:

  • 10:53 a.m.: $87 - $89
  • 11:00 a.m.: $88 - $90
  • 11:05 a.m.: $89 - $91
  • 11:17 a.m.: $90 - $91
  • 11:24 a.m.: $91 - $92
  • 11:28 a.m.: $92 - $93

By the time of the final indication, there were only a few million shares that had not been paired off. This was a good indication that we were getting close to opening.

But the stock did not open until 11:53 a.m., when 48 million shares were sold at $92.70.

Why did it take 25 more minutes from the time of the last indication to open? Because there were buyers sitting around watching the action, with intention to buy, who didn't want to act until the last minute, for whatever reason. Their last-minute bids, put in just as the stock was ready to open, prolonged the process.

In other words, it's a dynamic process. It is changing while you are watching it.

It's a great study in Game Theory, the study of watching multiple agents all acting in their best interests and responding to incentives (lower price if you're a buyer, higher if you're a seller), while trying to anticipate what everyone else will do.

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  Thursday, 18 Sep 2014 | 2:35 PM ET

It's like Alibaba cures cancer or something

Posted By: Bob Pisani
Jack Ma, founder of Alibaba Group Holding Ltd.
Dan Groshong | Bloomberg | Getty Images
Jack Ma, founder of Alibaba Group Holding Ltd.

OK, Alibaba doesn't cure cancer, but you'd think so with some of the theories going around.

I noted during my 9:35 a.m. ET hit that the stock market open was unusually strong: All major indices opened up, all 10 S&P sectors opened up, and both the Dow Industrials and Dow Transports were at new highs (Dow Theorists rejoice).

The most logical reason we would have this mild lift is that traders are unwinding hedges that were put on ahead of the Federal Reserve meeting that ended yesterday.

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  Thursday, 18 Sep 2014 | 1:49 PM ET

Alibaba's first day at school: What to expect

Posted By: Bob Pisani
Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

What can markets expect when Alibaba starts trading?

This is the biggest question on trading desks for the past several days. I don't make predictions on where stocks will trade, but there are several reasons I am optimistic that Alibaba—at whatever price—will open to the upside and stay there on its first day. Here are a few reasons why, put simply:

1. It's almost impossible to get the kind of numbers Alibaba has, anywhere. On all levels that matter: scale, growth, and margins, Alibaba is off the charts. It owns 80 percent of the Chinese e-commerce market, has seen 46 percent revenue growth in the most recent quarter, and has meaty margins of 54 percent.

These are stunning numbers, which almost no one has (Facebook has numbers close to it, and perhaps Google used to have it). But no one else.


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  Wednesday, 17 Sep 2014 | 2:56 PM ET

How an IPO gets done, step by step

Posted By: Bob Pisani
Alibaba founder Jack Ma gives a thumbs-up as he arrives to speak to investors at an initial public offering road show in Singapore Sept. 16, 2014.
Edgar Su | Reuters
Alibaba founder Jack Ma gives a thumbs-up as he arrives to speak to investors at an initial public offering road show in Singapore Sept. 16, 2014.

Alibaba's long-awaited IPO is finally around the corner, making this a good time to take a look at just how an IPO works.

In an initial public offering (IPO) a company issues stock to the public for the first time. Why would a company want to go public in the first place?

  1. To raise money to grow the company. This is the most common stated reason.
  2. For liquidity. The company may have private equity investors who want to exit from their investment. It may have senior management that may be retiring or seeking to monetize their investment. It may want to reward employees with options.
  3. Balance sheet restructuring, i.e. they are raising money to pay down debt.
  4. Acquisitions: They need money to buy other companies.
  5. Talent recruitment: Going public gives a company a "currency" it can use to recruit talent.

What's next? The easiest way to visualize this is using a timeline.

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  Wednesday, 17 Sep 2014 | 9:48 AM ET

Lennar's green shoots raise hopes for home sector

Posted By: Bob Pisani

Will Lennar finally turn around the negative sentiment dogging the home building sector?

The company reported a strong beat 78 cents per share on Wednesday, well above consensus of 67 cents per share. Orders were up 23 percent year over year, also above expectations. Average sales price, at $330,000, was up 14 percent from a year ago.

A 23 percent jump in orders? That is huge. The last two builders to report—Toll Brothers and Hovnanian—both put up 6 percent year over year declines.

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About Trader Talk with Bob Pisani

  • Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.

 

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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